In January 2025, the processing of periodic VAT returns (the “VAT chain”) will change in Belgium. With this reform, the VAT authorities intend to make VAT collection and refund procedures more automatic, harmonised and efficient. In addition, one aims to reduce the VAT gap of 4.44 billion euros by further incentivising taxpayers to better comply with the law.
The new rules may significantly affect the compliance workflow of VAT taxable persons who file periodic returns. Next to the extension of the deadline for filing quarterly returns to the 25th of the month (instead of the 20th) and the centralisation of VAT-related procedures within a single department of the VAT authority (the General Administration for Collection and Recovery), the following two new key features deserve the utmost attention from VAT taxable persons.
The VAT ‘current account’ will be replaced by a ‘provision account’
At present, the VAT balance of a VAT taxable person (i.e. whether he has a VAT credit or owes a VAT debit to the Treasury) is calculated by means of a current account which takes into account the amounts declared the VAT returns and the VAT payments made.
The general principle under this current account system is that VAT credits that may accrue in favor of a taxable person from its VAT returns are automatically carried forward to the next VAT returns, so that this credit can be used to absorb or offset any VAT due in the future. However, if the taxable person wishes to recover this VAT credit, he can initiate a claim for VAT refund via its return. This request automatically covers the entire credit shown on the current account. Conversely, when a taxable person defaults on VAT payment due or files its VAT returns too late, a 'special account' is created by the administration for recovery purposes.
From 2025 onwards, the authorities are introducing the new 'provision account', which is designed to make VAT refund procedures smoother and more automated. Broadly speaking, there are two notable differences;
- When a taxable person requests a refund via its VAT return (i.e. by ticking the designated box on the form), the refund procedure is expected to be more straightforward, but will only concern the VAT credit resulting from this return (excluding any previously accumulated VAT credits) ;
- To recover the credits (or part of them) accumulated in the past, a special refund request will have to be submitted via My Minfin (the national tax platform). In this case, a refund can only take place if the taxable person has been fully VAT-compliant for the last 6 months.
Failure to file or late filing of returns
As indicated above when a VAT return is not filed or is filed too late, a special account is currently created by the administration for recovery purposes. this special account will be abolished.
Starting in 2025, the tax authorities will themselves have the right to propose a substitute VAT return in the event of non or late filing of a tax return. In doing so, the tax authorities are taking their cue from the existing regime for direct taxation, whereby the authorities issue a proposition of return, leaving the taxpayer the opportunity to rectify it or not.
If a VAT return is not submitted within the legal deadline (the 20th of the month following the period covered by the return for monthly filers, and the 25th for quarterly filers from 2025 onwards), the tax authorities will issue a ‘substitute VAT return’ within three months. The substitute VAT return will be assessed based on the highest amounts reported in the VAT returns filed during the last twelve months, with a minimum amount of EUR 2,100 due to the Treasury.
Once issued, the taxpayer has one month to react by submitting its own VAT return, failing which the substitute VAT return is deemed to have been validly filed and a fine for late filing can be imposed. If the taxable person still wishes to object this, he can only do this via an administrative claim or judicial appeal.
An evolving administrative posture
In seeking to encourage taxable persons to achieve full VAT compliance, one appears to be overlooking some of the practical challenges for day-to-day VAT compliance. Whether a small start-up or a large business filing VAT returns in multiple jurisdictions, reporting errors and bona fide mistakes can easily happen. While automating the management of VAT returns will obviously bring advantages, the progressive loss of human contact between taxable person and the tax authorities may prove regrettable in the future.
Considering the foregoing, our general advice is twofold:
- Taxable persons are encouraged to be always fully VAT compliant, if necessary, by updating their internal compliance systems.
- It is highly recommended to monitor VAT credits more closely in the future, and to systematically request a refund via the VAT return if deemed appropriate.
